1. Field of the Invention
The present invention relates generally to the field of electronic commerce and more particularly to a method and system for managing auction transactions over a network, such as the Internet.
2. Description of the Related Art
Currently, a buyer participating in an auction, for example, over the Internet, does not really know if the purported seller actually exists, and neither does a seller in such an auction know whether the purported buyer actually exists. Therefore, a buyer who enters the winning bid takes a chance on the existence of the purported seller, as well as whether he or she will ever get the merchandise on which the bid was entered. Likewise, a seller who accepts the winning bid rakes a chance on the existence of the buyer who purported to enter the winning bid.
Typically, in such an auction, a user at a terminal, such as the user's personal computer (PC) accesses an auction page on the Internet, such as E-BAY and goes through a registration process. Registering basically means that the user at the user's PC enters the user's address, such as an e-mail address, and an e-mail is sent to the user, for example, at the user's PC, which tells the user that he or she is allowed to bid. The user is also given, for example, a bidding name, and the user sets up a password on the system.
It is well known that anyone, can set up an Internet account for an e-mail address with a service provider, such as AOL or the like, and it is possible for a party to secure an e-mail address while concealing his or her true identity. It is also possible for someone to use another party's e-mail address on an unauthorized basis, and e-mail addresses are commonly stolen and used without the owner's authorization. In short, there are no guarantees associated with an &mail address as to any identifying characteristics (e.g., age, gender, status) of the user of the e-mail address.
When the user registers on the auction page with the user's e-mail address and receives a bidding name, the user is ready to bid or list with the auction site. In the case of auction sites as with auction houses, at least one of the seller and buyer pays a fee for the opportunity to use the auction site. Usually the seller pays for the ability to list and sometimes pays an additional fee in the form of a percentage of the eventual selling price. The procedure varies for some auction houses, such as SOTHEBY'S, in which the buyer pays the fees. However, as a general rule, it is the seller who pays the fees, and the auction house generally bills or invoices the seller once a month. Upon receipt of the invoice, the seller generally pays, for example, by writing a check, although sometimes sellers can pay by credit card In the case of Internet auction sites, most people selling at auction over the Internet are not what we typically think of as merchants. Rather, they are simply individuals, and when they sell something, they are not usually equipped to receive payment by any means (e.g., credit card) other than by check, money order, or the like. This causes inconveniences for both parties, since the buyer must actually write a check or obtain a money order and then the buyer must wait until the seller is satisfied that the check will clear, etc., before the good(s) are transferred.
Internet auctions include, for example, normal auctions in which people enter bids and the bid price goes up as people bid higher and higher, as well as what are called Dutch auctions. In a Dutch auction, the process begins at a certain price, and the price goes down until somebody makes an offer at the current price. In a Dutch auction, effectively, someone wins the bid, because there are time frames. In other words, the bids are scheduled to end at a certain time, so they do not go continuously. In any event, when the bidding ends, the seller notifies the buyer via e-mail that the buyer has won the bid and asks the buyer to send the seller payment, such as a check or a money order, for the purchase price plus, for example, a certain amount for shipping and handling.
Upon receipt of such e-mail, it is up to the buyer to either write a personal check and/or get a certified check or a money order, which means a trip to the Post Office or the financial institution, and send the check or money order, for example to an address for the seller given in the e-mail. It is readily apparent that when the buyer sends the check or money order to the seller, the buyer takes a substantial risk that the seller actually exists and/or that the buyer will actually receive the good(s) for which the buyer has paid. The buyer expects the seller to package and ship the good(s) to the buyer when the seller receives a money order or a certified check. However, if the buyer pays by personal check, the seller typically waits several weeks for the check to clear before packaging and shipping the good(s). While one auction house has recently started a voluntary verification process in which users can have themselves “verified” by paying a fee and sending information to a credit bureau, the process is voluntary and does not take place on both sides of a transaction.
Accordingly, there is currently a tremendous amount of uncertainty in Internet auction transactions, for example, as to whether buyers or sellers really exist. There is likewise also considerable uncertainty as to whether or not buyers will pay, and if they do pay, whether the payment funds are good. Further, if the funds are good, there is a tremendous amount of uncertainty about whether the buyer will actually get the merchandise for which the funds were paid. The risk is a seller's risk, as well as a buyer's risk. The buyer risks not receiving the merchandise for which the buyer paid. The seller's risk lies, for example, in putting the seller's merchandise up for auction and receiving a winning bid, and waiting a month or more to discover that the buyer does not exist or sent bad funds for payment.